Easy & Valuable Personal Finance Basics! This Diwali take steps ahead towards Prosperity.

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Diwali! The festival of lights is around the corner.

Diwali signifies different meanings for its grand celebrations. It is the day of celebrating Lord Ram’s victory over devil King Raavan as well as Diwali is the auspicious day for Lakshmi Ganesha Puja.

This Diwali let’s not just do Lakshmi Pooja and pray for the prosperous year ahead. Let’s work on it together.

Personal Finance is a wide subject to cover. Let’s start with the basics of Personal Finance.

You may say this is back to the basics, we all are aware of the basics but reminding things over and over helps the concepts to get deep into our minds.  It helps you to keep your track & remain debt free.

Right?

The very basic elements for anyone’s personal finances include making a personal budget leading to savings and investment planning, managing your income and outgoings resourcefully as well as applying for loans and finance and various insurance policies you may need over for coming times.

As per Investopedia  the definition of Personal Finance is

“All financial decisions and activities of an individual, this could include budgeting, insurance, savings, investing, debt servicing, mortgages and more. Financial planning generally involves analyzing your current financial position and predicting short-term and long-term needs.”

 

Many say Personal Financial planning can best be self- accomplished, I don’t think so.

I would suggest if you don’t know where to start, talk to a financially savvy friend or financial advisor.

The most important lesson one must learn about money is that it is a limited resource and, therefore, holds an opportunity cost at all times.

 

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The very first rule of personal finance must always say: ‘Pay yourself first!’

What does paying yourself first mean? It simply means taking a fixed amount or percentage of your income and saving it beforehand.

Income –Savings = Expenses must be the rule to be followed and not the vice-versa.

Keeping records of your financial transactions provides the foundation for everything else to build on. The simplest one can begin with is by enrolling in automatic retirement savings plans.

Have you heard of the 50-20-30 Rule popularized by Senator Elizabeth Warren?

If yes, that’s good as you must me working on it.

If not, let me introduce it to you.

The rule simply says one must at least keep aside 20% of their income aside as savings for your short long or medium term goals; next comes 50% of the income which goes towards necessities & living expenses such as household expenses, including groceries; while 30% goes towards discretionary items spending, including outing, food and travel.

It’s not necessary that one size fits all, based on your income if you want you can start with less percentage of savings and increase it gradually as the key point is just to get you in the habit of saving. Even if that means you start small, it’s a start. And seeing your money grow can be very motivating helping to take further steps ahead.

 

The second rule of personal finance must say: ‘ Expect financial emergencies’

One could experience a setback to one’s earning capacity due to a temporary disability, ill health or being unemployed for a few months.

When it comes to handling financial emergencies many turn towards the funds collected for retirement or if not borrowing money or may be selling something.

Is that correct?

Always remember an emergency fund is not aimed at meeting your planned goals, but it only acts as a safety net which prevents you from falling in Debt.

When it comes to emergency funds there is no specific rule for it to be followed, it must be an amount which can help you combat you with financial emergencies.

If required you can start with taking a small percentage off your income.

 

Next, we come towards Insurance the third rule

Once you’ve got your debt queries squared away & you’ve figured out your money management and savings strategy it’s time to discuss Insurance.

Having necessary and sufficient insurance coverage for you is one important aspect of managing personal finance.

We don’t want to see our hard earned money to be wiped out by an act of nature or say negligence. Whether it’s your house, car, health or even life, we need to make sure we have enough insurance for anything worse that may happen to us.

Just like the emergency funds Insurance is important because it protects a person or entity from extreme financial loss or responsibility due to an unfortunate emergency, accident or negative unforeseen event.

The most cost-effective way of buying life insurance would be through a pure term insurance plan which is a low premium, high-cover protection plan where the premium goes entirely towards risk coverage.

 

Fourth rule Investments

Investing is like planting seeds; you nurture the planted seed and harvest the fruits of in the coming time in repeated fixed time intervals.

One of the primary reasons investing money is important is that it helps one to create more money. As opposed to just saving money in a bank account with fewer returns, investing money involves choosing to use that money to provide you more interest or investing stocks or mutual funds in order to earn a return on the money.

Savings help you in meeting and managing your short-term goals while investing provides returns and helps you grow your capital this, in turn, helps you to fulfill your financial goals.

 

The Fifth and most important rule!

Having Self-Discipline!

It’s not the money, it’s what you do with it that counts.

It is the tendency of people to spend everything they earn and a little more besides, usually supplemented by loans and credit card debt which prevents them from attaining them their financial goals.

The practice of self-discipline can help one attain the projected results.

I agree ‘It’s not always easy to build discipline in any area of your life, but when you make the effort, the rewards are definitely worth it!’ remember why you started and carry on.

If you want you can push large, discretionary spends to the end of the month, I think that might also be a good idea. End of the month spending would feel like a treat like a well-earned reward for exercising discipline throughout the month.

You should always make personal finance fun and be a motivated saver this has helped many save regularly and invest in such where they could earn interest or dividend.

Like many say:

Getting a handle on managing your basic personal finance administration can return many financial rewards including providing you with more free time to pursue your interests and freed up money to further invest.

These above thumb rules will help you build a strong foundation for your personal finance management which reminds me of what Gordon B.Hinkley had once said

You can’t build a great building on a weak foundation. You must have a solid foundation if you are going to have a strong superstructure.

 

Keep in mind to personalize your finances according to your risk profile and situations.

Once you have made a start using the thumb rules, it is important you review things time to time and make any required changes to your plan accordingly.

The thumb rules would come in easily for youngsters and newbies, who are beginning with their finance planning in getting their initial direction others who are in the middle of their career path but have lost the track of their finances remember better late than never and take hold of your finances using the thumb rules.

The Choice is yours!
The most important thing is to get started.
Hope you find the article helpful.
Have any of you made your plans?
Share your views! Who knows your plans or story may inspire other fellow readers!
Until next time we wish you a Happy Prosperous & Safe Diwali!
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Sushmita Thakare Jain

Founder & CEO at EFR International
I'm a Work Enthusiast & Blogger, Looking and Searching for what Life has new to Offer.
I help business owners Build their Brands and make them irresistible, profitable & simple to run.
I want to help you build your social media and it's marketing, business growth and digital strategy with confidence, so they're not just successful, but authentic as well as reliable.
If you are not a Business owner, don't worry for you I have services like Finance Management, Retirement Planning and much more to offer!
Other than work I'm someone, who love's 2 enjoy life, I love to keep things sweet n simple just like me!!!
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22 thoughts on “Easy & Valuable Personal Finance Basics! This Diwali take steps ahead towards Prosperity.

  1. Great post!

    Whilst money must never rule us, we need to be good stewards. There is nothing evil about it, it is man’s love for it.

    Our finances should be order; for the short and long term. It gives us peace of mind when we are able to meet our needs and cover ourselves in case of emergency.

    You mention insurance – it is so important to have this in place as we do not know what the future holds. Likewise with pensions.

    1. It’s good to know Phoenicia you connect with the post. You are correct our managed finances provide peace of mind and would like to say just like insurance retirement planning is important for your coming future to contain peace of mind too! Thanks for sharing your views.

    1. It’s said ‘Life is what happens to you while you’re busy making other plans.’ it doesn’t matter if you are not there yet what is important is that you have started and it’s great you are working on it!

  2. A good financial adviser is worth their weight in gold? Maybe… I’m glad I have one. In terms of handling living expenses and being thrifty, I am fine. It’s investments that I am so “unsavvy” with.

    1. Ramon it’s good to know you have a good financial adviser so they can work out your finances and incestments. Thanks for sharing your views!

  3. Very good tips, Sushmita. I agree that we are smart to leave our major financial decisions in the hands of experts. Without professional guidance, most of us flounder, not knowing how to properly plan for unexpected expenses. Your suggestions are helpful.

  4. Diwali makes me think of Dubai. First time I ever heard about that holiday and saw it celebrated. Experts should definitely handle major financial decisions. Pity they sometimes lose your money. Happened to me once.

    1. It’s good to know Catarina you have experienced the festival and its grand celebration. Glad you agree with me on experts handling major financial decisions.

  5. Good tips. Money is not a big concern for me, but security is. So when I save, it is not for the sake of saving, but to have a rainy day fund. As you stated though, you need to put your finances into the hands of experts. Just makes sure you do your search about who to choose.

    1. William whenever we take the decision of choosing an expert to handle our finances or when we choose a product to purchase we must always search of what you choose and then take the decision.

  6. Well said! Money may not buy happiness, but it does open the door to greater freedom … of course without self-discipline to manage it even that can quickly go south. Thanks for the advice and inspiration. 🙂

    1. I once came across a good quote ‘Self-discipline is often disguised as short-term pain, which often leads to long-term gains. The mistake many of us make is the need and want for short-term gains (immediate gratification), which often leads to long-term pain.’ expressing my gratitude for sharing your views.

  7. Very good advice. Planning for the unexpected is such a big thing and often gets overlooked. Also, learning to say: I love what money can do in my life, rather than: I hate money or I don’t have enough money or…you get the idea. Plan to use it like every other asset with have.

  8. This is important information! It’s great for 20 somethings just starting out and adults who want to know where to start. I am going to share it with many of my nieces and nephews so they realize that saving is important. I like that you mentioned pay yourself first and making it a priority. That is the best way to look at saving money. You are rewarding yourself.

    1. Thanks, Sabrina, will be looking forward to how nieces and nephews take the basics in the account. Thanks for sharing ahead!

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